Advisers are divided on outgoing FSA chairman Lord Turner’s call for the asset management industry to overhaul fund managers’ bonuses in a bid to promote long-term investment.
At the launch of a new report by the G30 consultative group this week, Turner argued that national authorities should draft new best-practice guidelines to promote long-term horizons in portfolio management.
He said: “Portfolio managers’ bonuses could be conditional on their performance over a defined period. For senior managers, a minimum of three years.
“This would support the goal of making smart medium-term asset allocation decisions in the context of a long-term investment horizons.”
Hargreaves Lansdown head of research Mark Dampier welcomes Turner’s call as he wants to see the interests of the unit-holder and fund manager closely correlated.
He says: “Having a three to five year performance bonus makes more sense and stops people jumping jobs in the industry. Short-term performance incentives offer little benefit to the industry as any fund manager can have their day in the sun.”
But Skerritt Consultants head of investments Andy Merricks says: “You should reward a manager for a return that reflects the targets of a sector or fund. This more often than not is focused on a shorter period.”
Informed Choice managing director Martin Bamford says: “Remunerating fund managers can be difficult but I would say aside from ditching performance fees, there is not too much wrong with the existing model. Making them focus on the long term can impact short-term returns and visa-versa.”